Current Year Tax Law Changes

Barnes Financial Services is excited to enter the 2026 tax season!  As always, we are ready to serve your financial needs with Tax Planning Strategies and Financial Planning Solutions.

Let's Begin Now

The IRS announced that the 2026 tax filing season opened on Monday, January 26, 2026.  This is the official date that all electronic filing can begin.

Please don't hesitate to gather your tax documents and schedule your appointment today.  Call the office at (317) 663-8452 or use our Online Calendar to schedule your appointment.


What To Look for from BFS

2025 Client Checklist - For returning clients, your 2025 tax checklist was sent to you via email to remind you of the items you should pull together for your 2025 tax preparation.  If you did not receive it by January 31st or had difficulty opening the checklist, please contact us so we can remedy the issue.

Tax Tips - As with every year, you can expect Tax Tips throughout the tax season to further educate you and provide helpful hints for tax savings. This season's tips will continue to focus on a wide range of topics.

Important 2026 Tax Deadlines & Dates

Jan 15 - 2025 4th Quarter ES Tax

Feb 02 - Employer Filings (W-2, W-3, 1099, 1096)

Mar 16 - S Corporate (1120S) 

Mar 16- Partnership (1065) 

Apr 15 - Corporate (1120)

Apr 15 - Trust & Estate (Form 1041)

Apr 15 - Individual (1040)

May 15 - Non-Profit (990)

2025 Tax Law Updates

Last summer, H.R. 1,  P.L. 119-21, known as the One Big Beautiful Bill Act introduced new deductions and made significant changes to many existing tax provisions.

These 2025 tax year updates are broken down into three sections.

Key 2025 Changes

• For 2025, the 7 TCJA's tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37% were made permanent with the H.R. 1 Act.

Standard Deductions

• Single filers - $15,750
• Head of household filers - $23,625
• Married filing separately - $15,750
• Married couples filing jointly - $31,500
• Qualifying Widow - $31,500

        Extra standard deduction for Tax Year 2026 

        - $2,050 for single or head of household

        - $1,650 per spouse for married filers

Form 1099K - Payment Card & Third-Party Network Transaction

• Form 1099-K is an IRS information return issued by payment processors (not customers) to report gross payment transactions processed on behalf of a taxpayer.

• Common issuers

  • Credit card processors
  • Third-party platforms (PayPal, Square, Stripe, Cash App, Venmo, Zelle* in limited cases, Etsy, eBay, Airbnb, Uber, etc.)

• Form 1099-K is issued when: 

  • More than $20,000 in gross payments AND

  • More than 200 transactions

• No matter the amount, if you receive payments for selling goods or services or renting property you must report your income. 

Child Tax Credit & Additional Child Tax Credit

• The act permanently increased the maximum Child Tax Credit to $2,200 per qualifying child. The refundable part of the credit, Additional Child Tax Credit, of $1,700 was also made permanent.
• A credit of up to $500 is available for each of your qualifying dependents other than children who can be claimed for the child tax credit. Therefore, you may be able to claim this credit if you have children age 17 or over, including college students, children with a disability, or other older relatives in your household. The qualifying dependent must be a U.S. citizen, U.S. national or U.S. resident alien. 
• The total of both credits is subject to a single phase out when adjusted gross income exceeds $200,000, or $400,000 if married filing jointly.

• Social Security numbers (SSNs) must be shown on the return for each child for whom the credit is being claimed, but also, new for 2025, the taxpayer claiming the credit (or in the case of a joint return, at least one of the spouses) must have an SSN, which must be included on the taxpayer’s return.

Standard Mileage Allowance
The standard mileage rates for 2025 for the use of a car (also vans, pickups or panel trucks) will be:

• 70 cents for every mile of business travel driven.
• 21 cents per mile driven for medical or moving purposes.
• 14 cents per mile driven in service of charitable organizations.

Alternative Minimum Tax exemption 

• The Alternative minimum tax (AMT) exemption amount increased to $85,700 ($133,300) if married filing jointly or qualifying widow(er); $66,650 if married filing separately).
• The income level at which the AMT exemption begins to phase out has increased to $609,350 or $1,218,700 if married filing jointly.
• The bill eliminates the corporate alternative minimum tax.
• This increase will result in fewer taxpayers paying AMT.
• The act permanently extended the TCJA’s higher alternative minimum tax (AMT) exemption amounts and exemption phaseout thresholds, indexed for inflation.

Mortgage interest

• The act made permanent the provision limiting the Sec. 163 qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt. It also permanently excludes interest on home-equity indebtedness from the definition of qualified residence interest. However, the act reinstated, starting in 2026, the provision allowing certain mortgage insurance premiums on acquisition indebtedness to count as qualified residence interest (which had expired after 2021).

Moving Expenses

• H.R. 1 made the TCJA’s elimination of the moving expense deduction permanent. Currently, only active-duty members of the U.S. armed forces may take the deduction. Starting in 2026, certain members of the intelligence community will also be eligible.

 Charitable Contribution Deductions

• Up to 60% of your AGI for cash contributions to public charities.

• Lower limits (e.g., 50%, 30%, or 20% of AGI) apply for other kinds of property or organizations.

• If you exceed these limits, you can carry forward excess contributions up to 5 years.

Earned Income Credit

• The earned income tax credit, or EITC, is aimed at giving low- to moderate-income workers and families a tax break.
• The dependent tax credit for 2025 is worth up to $8,046 with three qualifying children, $7152 with two qualifying children, $4,328 with one quality child and $649 with no qualifying children.  The refundable portion of the credit also known as the additional child tax credit, maxes out at $1,700 in 2025. The amount you receive depends on your income, filing status, and how many children you have.
• In 2025, you must have earned income of at least $2,500 to even be eligible for the refund.
• Effective for 2023, a taxpayer with no qualifying children has to be at least age 25 and under age 65 to qualify for the EIC.

Dependent Care Credit and Exclusion

• In 2025, the dependent care expense limitation is $3,000 for one child and $6,000 for two or more children. The credit is not a refundable credit. 
• The credit equals a percentage of dependent care expenses ranging from 35% for taxpayers with AGI not over $15,000, down to 20% for taxpayer with AGI over $43,000, with every percentage in between.
• You must have earned income throughout the year to qualify. Any money earned from pensions, foreign earned income, Social Security benefits, workers' comp, unemployment, investment income from interest or dividends or child support does not count.

Adoption credit

• Starting in 2025, for clients who have adopted a child during the year, H.R. 1 made a portion of the Sec. 23 adoption credit — up to $5,000 — refundable.

Bonus depreciation

• The Sec. 168 additional first-year (bonus) depreciation deduction was increased by the act to 100% for property acquired and placed in service on or after Jan. 19, 2025, as well as for specified plants planted or grafted on or after Jan. 19, 2025. However, property that taxpayers placed in service in the first 18 days of 2025 is subject to the former, reduced rate of 40%.

Sec. 179

• For property placed in service in 2025, H.R. 1 set the maximum amount a taxpayer may expense under Sec. 179 at $2.5 million, reduced by the amount by which the cost of the qualifying property exceeds $4 million.

Research-and-Development expenses (R&D)

• H.R. 1 enacted new Sec. 174A, which allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024. Research or experimental expenditures attributable to research conducted outside the United States will continue to be required to be capitalized and amortized over 15 years under Sec. 174.

NEW TAX BREAKS

H.R. 1 introduced four (4) new income tax deductions, but the IRS did not update information returns or withholding tables for 2025 to reflect these deductions. To claim these deductions, taxpayers will need to include Schedule 1-A, Additional Deductions, with their returns in the Form 1040 series. The new schedule includes sections for calculating a taxpayer’s senior deduction, tip income deduction, overtime income deduction, and car loan interest deduction.

Senior deduction

• H.R. 1 from 2025 through 2028 allows individuals who are age 65 and older to claim a deduction of $6,000. Married couples can claim a $12,000 deduction if they both qualify. The deduction phases out for taxpayers with MAGI over $75,000 ($150,000 for joint filers). To qualify, a taxpayer must turn 65 on or before the last day of the tax year. This new deduction is in addition to the current additional standard deduction for seniors of $1,600, or $2,000 if the individual is unmarried and not a surviving spouse.

Tip income deduction

• For the years 2025 through 2028, the act created a deduction of up to $25,000 for qualified tips received by an individual in an occupation that customarily and regularly receives tips. The deduction can be claimed by employees receiving a Form W-2, Wage and Tax Statement, and independent contractors who receive Form 1099-K, Payment Card and Third Party Network Transactions, or Form 1099-NEC, Nonemployee Compensation, or who report tips on Form 4137, Social Security and Medicare Tax on Unreported Tip Income. The deduction is available for taxpayers who claim the standard deduction or itemize deductions.
• The deduction begins to phase out for taxpayers with MAGI over $150,000 ($300,000 in the case of a joint return). For tax year 2025, employers required to furnish statements enumerating an individual’s tips can use “any reasonable method” to estimate designated tip amounts.
•  The tips must be received from customers or through a mandatory or voluntary tip-sharing arrangement, such as a tip pool. Qualified tips must be paid voluntarily by the customer and not be subject to negotiation. In cases where an automatic service charge is added to a bill with no option for the customer to disregard or modify it, the amounts distributed to the workers from it are not qualified tips.
• For self-employed taxpayers, the deduction cannot exceed the individual’s net income (without regard to the tip income deduction) from the trade or business in which the tips were earned. And married taxpayers must file jointly to claim the deduction.

Overtime income deduction

• H.R. 1 also created a temporary deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual during a given tax year. This deduction is also available for 2025 through 2028, and nonitemizers can claim it. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return), phasing out by $100 for every $1,000 the taxpayer’s MAGI exceeds the threshold. For single taxpayers, it phases out completely at MAGI of $275,000 and for joint filers at MAGI of $550,000.
• Qualified overtime compensation is overtime compensation paid to an individual that is in excess of the regular rate. Note that only the portion of overtime pay that exceeds the taxpayer’s regular rate of pay is eligible for the deduction — in other words, if the employee earns “time and a half” for overtime, only the “and a half” portion is deductible.

REPEAL OF EXISTING PROVISIONS

Electric vehicle credits

• The Sec. 30D clean vehicle credit, the Sec. 25E previously owned clean vehicle credit, and the Sec. 45W qualified commercial clean vehicle credit were all eliminated for vehicles acquired after Sept. 30, 2025.